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Was that the film only or is it like that all over the country?
Our country really does look like that :-D In many places the film put different parts of the country together but other than that the scenery was real, and was taken from all over the country too. The Shire was set in the Waikato where I grew up and when I saw it on the screen it really looked and felt like home (it's been a few years since I've been back, it was very nostalgic). The beach forests were very typical too, I've been tramping in a number of places like that. Obviously the middle of the cities don't look like the movie (although Helm's Deep is near central Wellington) but you're never far away from the countryside. I look around me all the time and feel lucky to live somewhere that really is so pretty.
Personally I thought the adaptation was great. I'd read the book a number of times before hand and know the story pretty well. I could see the changes they made but on the whole they don't affect the flow of the story and it works wonderfully as a film. Like many NZers I had to see it twice because the first time I was busy location spotting (and Shortland Street star counting *grin*). I'm greatly looking forward to the next instalment.